This year's extreme heat is significantly impacting small business owners. Rising ingredient prices, increased cooling costs, and higher delivery fees, combined with a decrease in foot traffic, are creating a challenging environment. If extreme heat continues to occur annually, the financial struggles for small businesses are expected to worsen.
According to the Korea Agro-Fisheries & Food Trade Corporation (aT) on August 10, the retail price of cabbage reached 3,509 won per head, a 28% increase from the previous month, while cucumbers sold for 7,977 won for ten, marking a 38% rise. Prices for perilla leaves (50g) and lettuce (100g) also surged by 41% and 31%, respectively, reaching 987 won and 1,230 won. Watermelons increased by 11% to 22,189 won each over the past month.
The extreme heat is cited as a primary cause of rising prices for agricultural and livestock products. The newly established heat wave warning system, which issues alerts when the perceived temperature exceeds 38 degrees Celsius, was first activated in Pohang and Gyeongsan on July 12 and was extended to all of Seoul on August 4, marking the first time such a warning was issued citywide. The number of tropical nights this year has also reached a record high of 14.2 days nationwide.
As raw material prices soar due to the heat, the outlook for the restaurant industry has become increasingly bleak. A survey conducted by the Ministry of Agriculture, Food and Rural Affairs and aT shows that the food ingredient outlook index for the restaurant industry has risen from 123.86 in the first quarter to 130.22 in the third quarter. However, the third-quarter business outlook index stands at 84.08, significantly below the baseline of 100.
The cumulative rise in prices has placed an even greater burden on small business owners than the indicators suggest. According to a report from the Korea Rural Economic Institute (KREI) on last year's restaurant management conditions, 41.4% of businesses reported significant difficulties due to rising ingredient costs. Monthly spending on ingredients has exceeded 4 million won and continues to rise each year.
Hong, who operates a pork belly restaurant in Yangcheon District, Seoul, stated, "The price of a box of lettuce has more than doubled, but we can't remove side vegetables from the menu due to the price increase. With foot traffic down because of the heat, our operating profit has halved compared to last year."
Cafes, which typically see a surge in business from June to August as consumers seek cool beverages, are not experiencing the expected seasonal benefits. Normally, this period would yield 2 to 3 times the usual profits, but rising ingredient costs and decreased foot traffic have left them with little to no profit. Additionally, the price of disposable plastic products, which surged after the Middle East conflict, has not decreased.
Cooling costs are another significant challenge for small business owners, as the use of air conditioning and other cooling devices has increased due to the heat. Kim, who runs a cafe in Seo-gu, Incheon, reported, "Last month, our cooling costs alone exceeded 600,000 won for our small 10-pyeong cafe. When the heat wave warning is in effect, there are hardly any people on the street, but we can't stop cooling the cafe either, which puts us in a difficult position."
The heat is also driving up delivery costs. In a system similar to ride-hailing, delivery costs increase as the heat intensifies. Small business owners report that delivery fees have risen by 10% to 20% compared to before the heat wave.
Jin Hyun-jeong, an economics professor at Chung-Ang University, noted, "The restaurant industry's outlook is already poor, and the cost increases due to the heat have made the situation even more challenging. The drought accompanying the heat could also affect ingredient prices during the fall harvest, making the situation appear more serious than expected."
Lee Jeong-hee, president of the Small Business Policy Association and a professor at Chung-Ang University, added, "When extreme heat occurs as it has this year, foot traffic decreases, leading to a contraction in domestic consumption. It seems likely that extreme heat will continue to recur annually, and the government needs to consider new policies to alleviate the burden of raw material costs on small business owners."
According to the Korea Agro-Fisheries & Food Trade Corporation (aT) on August 10, the retail price of cabbage reached 3,509 won per head, a 28% increase from the previous month, while cucumbers sold for 7,977 won for ten, marking a 38% rise. Prices for perilla leaves (50g) and lettuce (100g) also surged by 41% and 31%, respectively, reaching 987 won and 1,230 won. Watermelons increased by 11% to 22,189 won each over the past month.
The extreme heat is cited as a primary cause of rising prices for agricultural and livestock products. The newly established heat wave warning system, which issues alerts when the perceived temperature exceeds 38 degrees Celsius, was first activated in Pohang and Gyeongsan on July 12 and was extended to all of Seoul on August 4, marking the first time such a warning was issued citywide. The number of tropical nights this year has also reached a record high of 14.2 days nationwide.
As raw material prices soar due to the heat, the outlook for the restaurant industry has become increasingly bleak. A survey conducted by the Ministry of Agriculture, Food and Rural Affairs and aT shows that the food ingredient outlook index for the restaurant industry has risen from 123.86 in the first quarter to 130.22 in the third quarter. However, the third-quarter business outlook index stands at 84.08, significantly below the baseline of 100.
The cumulative rise in prices has placed an even greater burden on small business owners than the indicators suggest. According to a report from the Korea Rural Economic Institute (KREI) on last year's restaurant management conditions, 41.4% of businesses reported significant difficulties due to rising ingredient costs. Monthly spending on ingredients has exceeded 4 million won and continues to rise each year.
Hong, who operates a pork belly restaurant in Yangcheon District, Seoul, stated, "The price of a box of lettuce has more than doubled, but we can't remove side vegetables from the menu due to the price increase. With foot traffic down because of the heat, our operating profit has halved compared to last year."
Cafes, which typically see a surge in business from June to August as consumers seek cool beverages, are not experiencing the expected seasonal benefits. Normally, this period would yield 2 to 3 times the usual profits, but rising ingredient costs and decreased foot traffic have left them with little to no profit. Additionally, the price of disposable plastic products, which surged after the Middle East conflict, has not decreased.
Cooling costs are another significant challenge for small business owners, as the use of air conditioning and other cooling devices has increased due to the heat. Kim, who runs a cafe in Seo-gu, Incheon, reported, "Last month, our cooling costs alone exceeded 600,000 won for our small 10-pyeong cafe. When the heat wave warning is in effect, there are hardly any people on the street, but we can't stop cooling the cafe either, which puts us in a difficult position."
The heat is also driving up delivery costs. In a system similar to ride-hailing, delivery costs increase as the heat intensifies. Small business owners report that delivery fees have risen by 10% to 20% compared to before the heat wave.
Jin Hyun-jeong, an economics professor at Chung-Ang University, noted, "The restaurant industry's outlook is already poor, and the cost increases due to the heat have made the situation even more challenging. The drought accompanying the heat could also affect ingredient prices during the fall harvest, making the situation appear more serious than expected."
Lee Jeong-hee, president of the Small Business Policy Association and a professor at Chung-Ang University, added, "When extreme heat occurs as it has this year, foot traffic decreases, leading to a contraction in domestic consumption. It seems likely that extreme heat will continue to recur annually, and the government needs to consider new policies to alleviate the burden of raw material costs on small business owners."
* This article has been translated by AI.
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